Transfer Mispricing on Intra-group Trading Performed by Multinational Manufacturing in Indonesia: Evidence from Indonesian Tax Court 2015–2019

Abstract

Price setting on intra group trading by multinational manufacturing companies, which leads to market value underpricing or overpricing, causes transfer pricing disputes in Indonesia. This is reflected in Indonesian tax court cases. Based on the cases, almost all products manufactured by Indonesian contract manufacturer were sold to affiliates. This article discusses transfer pricing cases on intra group trading by multinational enterprises (MNEs) in Indonesia according to tax court decisions during 2015–2019 fiscal years. The cases covered in the Tax Court Decisions were submitted by taxpayers and include cases that were accepted and rejected by the board of judges. Research shows that common disputes are mainly triggered by determination of fair calculation on Cost of Goods Sold (COGS) items, miscalculation of COGS, different comparable data used to assess the application of the fair market price and mistake in recording the volume of goods traded. This phenomenon requires proper attention from the tax authority. Intra group trading, international tax, transfer pricing